White House Has Known For Months Obamacare Implementation Wouldn't Work

Last week, it scaled back several required provisions. They aren't the first. And probably won't be the last.

In this Sept. 7, 2009, file photo, supporters listen to President Obama speak at the AFL-CIO Labor Day picnic at Coney Island in Cincinnati.(AP Photo/David Kohl, File)

If you've been reading all the Obamacare stories lately, you might get the impression that the administration has just realized it will not be able to implement the massive health reform as designed.

It has known for months.

As far back as March, a top IT official at the Department of Health and Human Services said the department's current ambition for the law's new online insurance marketplaces was that they not be "a Third-World experience." Several provisions had already been abandoned in an effort to simplify the administration's task and maximize the chances that the new systems would be ready to go live in October, when customers are supposed to start signing up for insurance.

"There's been a focusing in not on: 'What is the full ACA vision?' but: 'What are the pieces we have to get running by October 1?" said Cindy Gillespie, senior managing director at McKenna Long and Aldridge, who is working with states and health plans.

To get a sense of what the Obama administration is up against, take a look at this chart, provided by Dan Schuyler at Leavitt Partners, a consultancy helping states build exchanges. (Bear in mind, this chart is supposed to simplify and explain.)

In an ideal world, the exchange websites need to be able to talk to several federal agencies—IRS to verify an applicant's income and employment status, the Department of Homeland Security to determine her citizenship, and the state government to see if she qualifies for Medicaid, to name a few—all in real time, so a person could fill out a form and purchase insurance in one sitting.

Each of those departments has its own computer system and its own means of tracking information. Creating a "data hub" to share them has been a challenge, as a recent Government Accountability Office report highlighted. It is increasingly clear that the kind of Amazon.com, one-stop shopping that was once described – and that Obama himself referenced in a speech on Monday -- will not be available in most parts of the country.

"It's the joyous, simultaneous, nonlinear equation from hell," said Kip Piper, a former top official at HHS and OMB who is now a consultant in close contact with IT vendors. Piper said it's no surprise that the administration has given up on certain functions given the technological complexity needed and the short time-frame.

But the long-term nature of the bad news could be good news for those who hope that the new marketplaces will launch in some form on time.

The struggles with technology and administrative complexity have not come as a recent surprise to administration officials; they've been negotiating them for months already. By eliminating non-essential tasks, they may be violating the letter of the health reform law, with its rigorous timetables and multiple requirements, but they may be more likely to get the core functions right.

And whatever the bad politics of the recent announcements, a failure of crucial systems next year would be much worse for the president and Democrats running in 2014. "I continue to see the federal government focusing on mission critical issues, and moving forward on them, and jettisoning to the extent they have to the things that aren't mission critical," says Joel Ario, a Managing Director at Mannatt Health Solutions, a consultancy, and the administration's former top exchange official. "I have not heard anything that suggests to me that we will not move forward with the main exchange functions in time."